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Defense Cuts Continue To Draw Blood


Economic Trends

DEFENSE CUTS CONTINUE TO DRAW BLOOD

Why does the U.S. economy keep sputtering? Some say that consumers still have too much debt left from the 1980s. Others believe that layoffs at bloated corporate behemoths are depressing spending.

But according to the lastest government statistics, it's defense cutbacks that must assume a large share of the blame. Since December, 1991, U.S. production of final goods--consumer goods, plus equipment and machinery bought by business and government for their own use--has fallen by 0.3%. Of that drop, roughly 75% has come from falling output of missiles, submarines, and other military equipment.

The same story holds for manufacturing employment. Over the past year, manufacturing has lost 300,000 jobs. Just six key defense-dependent industries--ordnance, communication equipment, navigation gear, aircraft, ships, and guided missiles--account for almost 40% of that decline, even though they only make up 8% of the manufacturing work force. Indeed, since a machinist or engineer laid off by a defense contractor may put off buying a new car, couch, or stove, the defense cuts are having a big ripple effect across the economy. And with more cuts sure to come, strong recovery may be elusive for a while.KAREN PENNAR, with Michael J. Mandel in New York


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